Karachi stock market reflects political, economic uncertainty

The Karachi stock market closed down over 4.5% on Friday in the largest single-day loss of 2008. According to Dawn1, investors had expected a drop after the State Bank of Pakistan raised the discount rate to 12% from 10.5% on Thursday in a bid to curtail inflation. However, the size of the drop suggests that the rate increase was a pretext for exiting the market as Pakistan faces tough political and economic challenges. Since mid-April, the Karachi stock market has lost about 20% of its value. Inflation has increased dramatically, the government budget deficit has reached record heights, and foreign exchange rates have fallen.

1 Hussain, Dilawar. Billions wiped off on KSE’s ‘black Friday’. Dawn. May 24, 2008.

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